THE UK INFLATION rate hit a nine-year high in August with prices increasing by 3.2%, a sharp increase from the 2% recorded in July, way above the Bank of England’s target level of keeping the inflation rate at 2%.
This was the biggest month-on-month jump in the Consumer Price Index (CPI) since records started in 1997 with economists predicting the rate will shoot up to over 4% before increasing to 5% next year.
With inflation starting to spiral out of control, the governor of the Bank of England, Andrew Bailey, now has the job of writing a letter to the Tory Chancellor explaining why the Bank has allowed this to happen and what is it going to do to control it.
So far, Bailey has confidently insisted that this spike in inflation is a mere temporary blip caused by the effects on the economy of the pandemic and that this will work its way out of the system once British capitalism recovers.
What Bailey has resisted is any suggestion that the policy of pumping trillions of pounds of worthless money into the banks and money markets under its Quantitative Easing scheme coupled with near-zero interest rates has anything to do with the inflationary explosion.
The Bank is still pumping out £3.4 billion a week to keep bankrupt British capitalism from drowning in debt while the historically low interest rates make repayment of all the debt run up by government, companies and the capitalist money markets affordable.
But all this free money that has kept capitalism afloat has driven inflation up in a never-ending spiral.
Now, according to a recent article in The Daily Telegraph, the Bank ‘is under pressure to rein in its emergency stimulus measure’ to try and get a grip on inflation and economists ‘are increasingly concerned that Threadneedle Street is being too complacent about the potential for a spiral of price increases that outlast the legacy of Covid.’
Bailey and the Bank are clinging to the forlorn hope that inflation will go away because the alternative is to end QE and push up interest rates.
This will bring the debt mountain crashing as companies that exist entirely through cheap debt will crash along with the hedge funds who have used debt to fuel their multi-billion pound takeovers of businesses.
The British government’s £2.3 trillion pound national debt would become unaffordable if forced to increase its interest repayments, opening the way for the UK to default.
While the Bank wrestles with the pain of trying to find a way out of the crisis and somehow rescue capitalism from inevitable economic collapse, the real pain is being inflicted on the working class.
Already the increase in inflation has led to a massive surge in the cost of living for workers and their families, while at the same time the Tories are slashing Universal Credit and imposing wage freezes. The cost of energy, petrol, food and housing have all shot up.
Petrol now costs an average of £1.35 per litre compared with £1.13 per litre a year ago.
Electricity prices have shot up by 5.8%, with people facing bills for energy that will shoot up by 12% next month with further increases as the Tories end the cap on energy bills at the end of the month.
Global food prices have hit their highest level for seven years while shipping costs have trebled.
This has thrown millions of workers, already driven into poverty and debt during the pandemic, facing being unable to feed themselves or their children or pay for heating during the winter.
This means directly ahead the class struggle will explode as workers refuse to be driven back to the poverty conditions of the 19th century.
What will be demanded by the working class is a general strike to bring down the Tories and bring in a workers’ government and socialism.
In its bankrupt death agony, capitalism must be overthrown and replaced by a socialist society for workers and young people to have a future free from poverty.
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